Cross border migration and climate shocks
domestic product . That ’ s about 20 percentage points below the level for other emerging markets around the world ,” they said .
Trade between countries in the region , they said , also lags and has stayed broadly flat at less than 20 per cent of Latin America ’ s total trade . That amounts to just half the level of intra-regional trade in Eastern Europe and Central Asia and a third of the level in East Asia .
“ Latin America ’ s participation in global value chains is also limited . That ’ s because many countries are more focused on exporting raw commodities rather than intermediate or final goods , although Mexico ’ s much more integrated economy is a prominent exception mainly due to its close ties with the United States ,” said both men .
Latin America would probably enjoy large economic gains by improving important commercial infrastructure , such as transportation and customs , a new IMF study showed . Streamlining customs procedures , fostering public-private partnerships in the logistics industry and lowering bureaucratic obstacles are examples of policies that can help .
“ Narrowing the infrastructure gap between the region and advanced economies by half , for example , would lower trade costs and result in a 30 per cent increase in exports , our latest research shows . This larger demand for the region ’ s products in turn would boost GDP by as much as seven per cent , which underscores why policymakers should pay greater attention to improving trade-related infrastructure . Because some countries may not be able to afford large infrastructure investments , progress requires prioritizing the biggest bottlenecks and attracting more private investment ,” they commented .
Against this backdrop , the energy transition is expected to profoundly alter global trade patterns . Latin American countries with large reserves of critical minerals ( such as Chile , Peru , Brazil , Mexico and Argentina ) could benefit substantially from rising demand for copper , lithium , magnesium and other essential inputs for green technologies and decarbonisation . With the appropriate policy frameworks , these resources could attract significant investments and may help develop opportunities for Latin American countries to increase their participation in global value chains .
Finally , nearshoring , where companies relocate parts of their supply chain operations to closer countries for resilience reasons , is also an opportunity for countries across the region to increase trade . Mexico is an example of a country that has been benefitting from more investment in manufacturing due to this trend .
“ Overall , closing infrastructure gaps , further reducing trade barriers and putting in place policies that make Latin America a more attractive investment destination should be key elements of the region ’ s trade strategy going forward ,” concluded Moreau and Machado Parente .
Cross-border migration and climate shocks have been shaping the economies of the countries in Latin America and the Caribbean ( LAC ) for many decades . Globally , LAC is one of the regions with the largest migrant populations ( measured as a share of the population of origin country ). This region is also among those most susceptible to climate events including hurricanes , storms , floods and droughts . This climatemigration nexus is especially critical for the region ’ s two sub-groups of smaller economies : the Caribbean and Central America , Panama and the Dominican Republic ( CAPDR ).
IMF analysis sheds light on different drivers of cross-border migration , the importance of climate shocks and the impact of climate-induced migration on the economies in the region .
“ Migration occurs due to many factors including difference in pay between jobs in home countries and foreign countries , migration policy and social safety nets . Using a novel methodology , our analysis on climate and cross-border migration helps to explain outward migration patterns over the past few decades ,” said the IMF .
“ We broke down the drivers of migration into three groups : origincountry , destination-country and global factors . We find that the origin-country factors have become more prominent in the LAC region , especially in the smaller economies of the Caribbean and CAPDR , making them a more important driver of total migration outflows . Among others , social safety nets may have also become more strained across the region due to rising climate shocks , thereby raising the importance of origin-country factors ,” it explained .
Climate disasters significantly impact total migration through conditions in countries of origin , according to IMF ’ s research . In fact , it confirmed , three additional climate disasters annually over a five-year period can be associated with around a one per cent increase in people leaving their home countries in the Caribbean and CAPDR .
“ Comparatively , the impact in South America and Mexico is relatively smaller , ranging between ¼ and 1/3 per cent ,” highlighted the IMF .
Its analysis finds that about one fifth of climate ’ s overall impact on agricultural output in the countries in the Caribbean and CAPDR is due to climate-induced labour movement .
“ The increasing frequency and impact of climate shocks calls for urgent strengthening of policy responses and programmes to build resilience and mitigate the impact of climate shocks on the population , including by reinforcing social safety nets ,” concluded the IMF in December 2023 . n
EDITOR ’ S NOTE For more details , see the IMF ’ s ‘ Western Hemisphere Regional Economic Outlook ’ on https :// shorturl . at / fqBOX
Sao Paolo , Brazil .
Image : Shutterstock . com .
26 | ismr . net | ISMR December 2023 / January 2024